Hong Kong Questions Application Of Italian FTT
07 June 2013
Posted by: Author: Mary Swire
Author: Mary Swire
In reply to a question in the Legislative Council (LegCo), the Secretary for Financial Services and the Treasury, Professor K C Chan, confirmed that Hong Kong is attempting to clarify details with Italy of its financial transaction tax (FTT), and has communicated the views and concerns of Hong Kong's financial sector.
The Italian FTT was introduced by legislation promulgated on December 24, last year, and an enabling decree was issued on February 28 this year, so that it could begin to be levied on March 1, as stipulated in the 2103 Budget. It is currently imposed at 0.22 percent on the value of transactions on over-the-counter markets in shares issued by Italian-resident companies (or other equity instruments linked to those shares, no matter where they are issued), reduced to 0.12 percent for such transactions on regular stock markets.
There will also, from July 1, be a tax on derivatives, the level of which will depend on the type of instrument transacted and the value of the deal, and which will be reduced by one-fifth for transactions over regulated markets. A levy will also be charged on high-frequency trades on Italian financial markets.
The Italian FTT is payable even if the transaction is concluded outside of Italy and if both parties to the deal are also domiciled abroad.
Prada S.p.A. is currently the only Italian company listed in Hong Kong, and its shares and derivative warrants are traded on Hong Kong Exchanges and Clearing Limited (HKEx). In response to the request from the HKEx, In two announcements this year, Prada has provided information on the new tax, and stated that relevant instructions about FTT payment were expected to be set forth by an official provision to be issued by the Italian Revenue Agency.
Chan indicated that, based on the Italian legislation, the ultimate transferees in the case of shares and other equities transactions, and both the ultimate transferors and transferees in the case of equity derivatives transactions, are liable for the FTT, while the obligation to pay the FTT falls on the financial intermediaries involved in the execution of the transactions.
However, as far as the relevant transactions effected in Hong Kong are concerned, since there is uncertainty regarding the identities and obligations of those liable for, and those liable to pay, the FTT and the person(s) to pay the FTT, the tax computation and the payment procedures remain subject to clarification by the Italian authorities.
He disclosed that, early last month, the HKEx wrote to the Italian Ministry of the Economy and Finance, seeking clarification on related issues such as the above-mentioned obligations, the tax computation and the payment procedures. In addition, the HKEx has commissioned tax consultants to advise it on the impact of the Italian FTT on the HKEx, local financial intermediaries and other market participants.
The Hong Kong Government has also contacted the Italian authorities through various channels, including the Hong Kong Inland Revenue Department and its overseas Economic and Trade Office, to help the financial sector obtain further information. It has only been learnt that Italian Revenue Agency should announce the relevant instructions on the details of the FTT, which will cover the payment procedures, in July this year.
As the LegCo question also asked whether consideration had been given to imposing an FTT in Hong Kong, Chan was pleased to confirm, making reference to Hong Kong's adherence to a low and predictable tax regime, and the maintenance of a favorable and competitive business environment, that the Government has no intention of introducing such a tax.